Why Are We Picketing at the Citigroup Shareholders’ Meeting?

[Note: this was written for a protest in 2012. Then updated for one in April 2013. It’s too late to attend that one but all of our grievances stand (alas) so you can probably join us this April. Stay tuned.]

Some things take intolerably long to change. The following was written almost a year ago for “Occupy the Citi,” which was a “Day of Public Outrage and Education” held by Occupy Astoria LIC at the “other” Citigroup Tower, the one in Queens. The text needs only minor changes – we turn “four years” into five, switch the name of the suit at the top from Pandit to Corbat – and presto! It’s as timely as ever; a sad truth. This is why Occupy Wall Street is still protesting Citigroup next Wednesday morning. This time we’ll be at the annual shareholders’ meeting. (Note: Following views and opinions belong to Nicholas Levis. Blame him.)

Why Occupy the Citi? What Are Our Grievances?

Five years ago, Citigroup and other major Wall Street banks became insolvent as a result of their own predatory and reckless actions in the mortgage-backed security and derivatives markets. This caused the most dramatic financial crash since 1929.

The institutions responsible for the resulting global depression and worldwide misery constitute a public danger. They should have been liquidated. The executives should have been fired and subjected to criminal investigation. A banking system that causes such a disaster should have been reinvented.

Instead, a government corrupted by Wall Street money decided that the insolvent “zombie banks” were “Too Big To Fail” (TBTF). While smaller and often more solvent banks were allowed to go bankrupt, the TBTFs were rescued with trillions of dollars from taxpayers and the Federal Reserve.

Citigroup alone received $45 billion in direct cash bailouts from the Treasury – the taxpayers – and was privileged with an incredible total of $2.5 trillion in near-zero interest loans (GAO-11-696, p. 131) as well as additional guarantees from the Federal Reserve. Together, the TBTF banks received more than $13 trillion in bailouts from the Treasury and Federal Reserve, and ongoing potential taxpayer exposure on all government guarantees for banks to date exceeds $3.5 trillion. [Note: In the year since this was first written, much has been made of how banks have “paid off” TARP or other bailouts, without noting the continuing exposure in case of future failure, or asking: Why were criminal institutions entitled to a bailout in the first place?]

Since the crisis, while the Federal Reserve discount window has offered the TBTFs loans at almost zero percent interest, the big banks have also been able to buy Treasury bills paying 3 percentage points higher. In other words, the US government is providing free money and free profit to the TBTFs, helping to keep them afloat. Furthermore, in 2009 the government suspended “mark to market” accounting rules for banks, which means that banks can value their assets at ideal value, rather than at the prices actually available on the market. In short, banks are allowed to cook their books so that they can look solvent.

Because they were bailed out, the TBTFs were able to continue foreclosing on individual debtors, for whom no effective rescue has been offered.

Because We the People were forced to rescue banks like Citigroup, Goldman Sachs and Bank of America, today they continue to pay exorbitant bonuses to the executives who helped to crash the world.

Thanks to taxpayer money, Citigroup and its siblings can continue to pay for an army of lobbyists in Washington and influence legislators with campaign donations. Citigroup was #3 among the 10 biggest corporate campaign contributors in U.S. politics over a 20-year period, just behind Goldman Sachs. Its spending peaked during the crash year of 2008, in the run-up to receiving its bailouts. Citi’s biggest recipients in the 2010 election cycle included our New York senators, Charles Schumer and Kirsten Gillibrand, and Queens Congressman Joseph Crowley. This doesn’t count Citi’s spending on lobbyists in Washington, which totaled $62 million from 2001 to 2010.

Thanks to the TBTF doctrine, Citigroup can still buy favorable PR by purchasing endless ad time to tell us of its supposed charitable works, and, incidentally, by sponsoring our beloved New York Mets.

How does Citigroup show its gratitude for the federal rescue? In 2010, Citigroup declared $4 billion in profits and paid no federal income tax. In fact, it received a $1.9 billion tax refund. (Similar numbers apply in the cases of Bank of America and Goldman Sachs.)

During the final phase of the housing bubble, Citigroup was one of several institutions known to have conned investors into buying securities that were designed to fail, even as they bet against the same securities they were selling. When the government found evidence of one such multi-billion-dollar fraud, however, no one was prosecuted. Instead, the US Securities and Exchange Commission (SEC) asked Citi to pay a penalty worth only a fraction of the amount defrauded from the investors: a mere business expense. The SEC settlement – which for now has been blocked by a courageous judge – did not even require Citigroup to acknowledge wrongdoing.

Today, the Wall Street banks bailed out by the public continue to profit from predatory actions. In a system where money controls politics, Wall Street is above the law… (continued)